Bài giảng Marketing Công nghiệp (B2B Marketing) - Chapter 5: Industrial Product Strategy - ĐHKT TP.HCM

1/3/2017 1 Chapter 5 Industrial Product Strategy www.dinhtienminh.net DINH Tien Minh (Ph.D.) University of Economics HCMC Objectives 2 Understanding the meaning of an industrial product. Know the factors influencing changes in product strategy. Learn product life-cycle theory and its applications. Understand steps involved in developing product strategies. Learn branding in business market. Content 5.1 Definition of an industrial product 5.2 Changes in product strategy 5.3 Industrial product life-cycle and strategies 3 5.4 Developing product strategies 5.5 Branding in Business Market 1/3/2017 2 4 5.1. Definition of an industrial product Definition: The industrial product in defined not only as a physical entity, but also as a complex set of economic, technical, legal and personal relationship between the buyer and the seller. Nguồn: Webster F.E., Jr., Industrial Marketing Strategy, John Wiley & Sons, 2nd edition, p.106. 5 5.1. Definition of an industrial product Example of an industrial product  Product: Moulded Case Circuit Breakers.  Economical side: Price  Technical side: Specifications  Legal side: If the supplier delays delivery.  Personal relationships between itself and the suppliers. 6 5.1. Definition of an industrial product From the customer’s point of view, a product is a combination of :  Basic properties are included in generic product made differentiable by adding tangible benefits.  Enhanced properties such as product features, styling and quality.  Augmented properties such as spare parts, maintenance, repair service, warranties Nguồn: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p42 1/3/2017 3 7 5.1. Definition of an industrial product Technical assistance Spare Parts Maintenance Timely Delivery Payment term Augmented Product Enhanced Product Generic Product Features Styling Quality Fundamental Benefits 8 5.1. Definition of an industrial product An industrial marketer should be aware of what constitutes a total product package in the mind of prospective customers (Tangible and Intangible Benefits) 9 5.1. Definition of an industrial product Example of an industrial product  Product: Diesel Engines.  Tangible benefits: Product quality (less noise, simple or easy operation).  Intangible benefits: Availability of Spare parts, Technical assistance, Training 1/3/2017 4 10 5.2. Changes in product strategy 11 5.2. Changes in product strategy (cont’) Factors demanding changes in product strategy: 1. Customer’s needs: Monitor continuously changes of customer’s needs and continue to satisfy by making changes in its products.  Example: Increase of cost of land used for storing raw material, the firm’s need have changed for vertical stacking from 2m to 6m height in order to save space and money. 12 5.2. Changes in product strategy (cont’) Factors demanding changes in product strategy (cont’): 2. Technology: The change of technology can require either the product modification or make existing product obsolete.  Example: The jelly filled telecom cables are getting replaced by fiber optic telecom cables. 1/3/2017 5 13 5.2. Changes in product strategy (cont’) Factors demanding changes in product strategy (cont’): 3. Government’s policies or laws  Example: Government issues orders for banning the use of wood for window, door and partition frame and recommends the use of steel and aluminum frames in order to save natural environment. 14 5.2. Changes in product strategy (cont’) Factors demanding changes in product strategy (cont’): 4. Change of PLC: In order to maintain growth in sales and profits, the industrial firms decide to drop, or modify, or develop new (substitute) products when existing products reach “maturity” or “decline” stages in PLC. 15 5.3. Industrial PLC and Strategies 1/3/2017 6 16 5.3. Industrial PLC and Strategies (cont’) Nguồn: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p166. A General Model of the PLC Sales and Profits + 0 _ Industry Sales Industry Profits Introduction Growth Maturity Decline Slower rates Time 17 5.3. Industrial PLC and Strategies (cont’) Nguồn: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p167. The PLC for High-tech products Time Sales NPD I&G M D NPD = New Product Development cost and time are high I&G = Introduction and Growth period are long M = Maturity period is very short (rapid change in technology) D = Decline period 18 5.3. Industrial PLC and Strategies (cont’) The PLC for Commodity products Nguồn: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p167. Time Sales The demand remains relatively inelastic, especially in monopolistic market. The sales does not experience a decline due to the absence of competition. 1/3/2017 7 19 5.3. Industrial PLC and Strategies (cont’) Three factors affecting to the behavior of the PLC:  Changing the needs of customers.  Changes in technology.  Changing competition. 20 5.3. Industrial PLC and Strategies (cont’) 21 5.3. Industrial PLC and Strategies (cont’) Application of PLC theory to Marketing strategies: 1. Introduction stage: What should we do? • Some products get accepted rapidly, the marketing strategy should be evolved to meet intense competition. • For slowly accepted product, marketing strategy should concentrate on market development efforts. Example: Hand-held electronic calculators replaced mechanical calculators in a very short time. 1/3/2017 8 22 5.3. Industrial PLC and Strategies (cont’) Application of PLC theory to Marketing strategies (cont’): 2. Growth stage: What will we do? • Improve product design (benefits, features to cover wider segments of the market). • Improve distribution (stronger availability). • Reduce the price as increased volume of production (economies of large scale). Example: In India, with additional feature like camera and increased number of dealers, LCD projector prices were reduced. 23 5.3. Industrial PLC and Strategies (cont’) Application of PLC theory to Marketing strategies (cont’): 3. Maturity/ Saturation stage: What should we think of? • Enter new market. • Keep the existing customers satisfied. • Cut Marketing, production and other costs to maintain profit margins. 24 5.3. Industrial PLC and Strategies (cont’) Application of PLC theory to Marketing strategies (cont’): 4. Decline stage: Price competition is more severe, the strategy adopted is to either: • Withdraw the product from the market. • Develop a substitute product. • Reduce marketing and other expenses. Example: The decline tends to proceed rapidly since new technologies make established products obsolete . 1/3/2017 9 25 5.3. Industrial PLC and Strategies (cont’) But how to locate industrial products in their life cycle? 26 5.3. Industrial PLC and Strategies (cont’) Locating Industrial Products in their Life Cycle:  Step 1: Develop a trend analysis for the past three to five years based on information to be collected for an industrial firm for a product, on quantity and value of sales, profits, market share, number of competitors and prices.  Example: Trend of Motobike industry in VN 27 5.3. Industrial PLC and Strategies (cont’) Locating Industrial Products in their Life Cycle:  Step 2: Analyze competitor’s market share, product performance, new product introduction, diversification or expansion plans.  Step 3: Estimate sales and profits of the product over next three to five years.  Step 4: From the above analysis, fix the product’s position on its life-cycle curve. 1/3/2017 10 28 5.4. Developing Product Strategies 29 What are called new product? 1. Innovative and new to the world. 2. New to the company, but not new to the market. 3. Revisions or improvements to the existing products in the existing markets. 4. Addition to the existing product lines with additional markets. 5. Repositioning existing product to new market segments. 5.4. Developing Product Strategies (cont’) 30 New product development process: 5.4. Developing Product Strategies (cont’) 1/3/2017 11 31 For the existing products, the following steps should be taken:  Step 1: Evaluate the performance of all the existing products by using Product Evaluation Matrix (PEM). 5.4. Developing Product Strategies (cont’) 32 5.4. Developing Product Strategies (cont’) Product Evaluation Matrix Nguồn: Developed by Yoram Wind and Henry Claycamp – Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p170. Company Sales Profitability Decline Stable Growth Below Target Target Above Target Below Target Target Above Target Below Target Target Above Target Industry Sales Market Share Dominant Growth Marginal Average Dominant Stable Marginal Average Dominant Decline Marginal Average S1 S Competitor P 33 For the existing products, the following steps should be taken:  Step 2: By using Perceptual Mapping (PM) technique, examine the relative strengths and weaknesses of the company’s products in comparison to competitors’ products. 5.4. Developing Product Strategies (cont’) 1/3/2017 12 34 5.4. Developing Product Strategies (cont’) Perceptual Mapping Technique Nguồn: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p171. New position High quality Low quality Weak services Strong services B C A1 A Old position 35 For the existing products, the following steps should be taken:  Step 3: Based on the above analysis, decide the product strategies:  Maintain or continue the products and its strategies.  Modify the product and/or change the mkt strategies.  Eliminate or drop the product or the product line.  Add new products or new product lines 5.4. Developing Product Strategies (cont’) 36 Product Elimination Dropping the product or product line is one of the most controversial decisions because many stakeholders are threatened by this decision. A firm should therefore consider the following factors: -Is there a new product to replace the eliminated one? -Will the consumer relationships be affected? -Will the sales of other products get affected? -Will the company’s image be affected? -What will be the possible competitive reactions? 5.4. Developing Product Strategies (cont’) Nguồn: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p172. 1/3/2017 13 37 5.5. Branding in Business Markets 38 5.5. Branding in Business Markets (con’t) Definition:  A brand is defined as a name, symbol, term, sign, design, or a combination of them, intended to identify the goods or services of one seller and differentiate them from those of competitors. Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p172. 39 5.5. Branding in Business Markets (cont’) Definition:  Brand equity is the value of a well known brand. It’s measured by answering these questions: 1. Customers are willing to pay a higher price. 2. Customers take less time to decide the orders. 3. Customers give a higher share of their purchase requirements. 4. Less likelihood of customers switching to competitors’ offerings. Source: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p172. 1/3/2017 14 40 5.5. Branding in Business Markets (cont’) Brand Equity 1. Brand Awareness 2. Perceived Quality 3. Brand Associations 4. Brand Loyalty 5. Other Values Brand Equity www.dinhtienminh.net